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Global Competitiveness Report: Botswana falls down pecking order

Publishing Date : 22 October, 2018

Author : ALFRED MASOKOLA

Botswana’s poor infrastructure; health care concerns, lack of business dynamism and  innovation capability is hindering the country’s economy from becoming competitive, according to the Global Competitiveness Report 2018 released this week.


The Global Competitiveness Report is a yearly report published by the World Economic Forum. Since 2004, the Global Competitiveness Report ranks countries based on the Global Competitiveness Index. The Global Competitiveness Index measures the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity. This year countries were measured on 11 pillars; institutions, infrastructure, ICT adoption, macro-economic stability, health, skills, product market, labour market, financial system, market size, business dynamisms and innovation capability.


Botswana fell five places from last year’s ranking of 85th to 90th out of 140 countries in the world. According to the report, pillars makes clear that in many countries, the root causes of slow growth and inability to leverage new opportunities offered by technology continue to be the ‘old’ developmental issues—institutions, infrastructure and skills.


“Notably, the disappointing economic performance of most Sub-Saharan African countries is more attributable to weaknesses in these areas than in any others, and the much-vaunted economic leapfrogging will not happen unless these issues are addressed decisively, “the report notes. Botswana has fared badly in the infrastructure pillar. This pillar looks at the quality and extension of transport infrastructure (road, rail, water and air) and utility infrastructure. Botswana is ranked 108 in the infrastructure pillar.


The report argue that infrastructure is a necessary component because better-connected geographic areas have generally been more prosperous. “Well-developed infrastructure lowers transportation and transaction costs, and facilitates the movement of goods and people and the transfer of information within a country and across borders. It also ensures access to power and water—both necessary conditions for modern economic activity,” indicates the report.


Botswana’s worst ranking comes in the health pillar, ranking 115 in the world.  The health pillar captures the Health-adjusted life expectancy (HALE)—the average number of years a new-born can expect to live in good health. “Healthier individuals have more physical and mental capabilities, are more productive and creative, and tend to invest more in education as life expectancy increases. Healthier children develop into adults with stronger cognitive abilities,” says the report.


Botswana ranks 98th in ICT adoption pillar which looks at the degree of diffusion of specific information and communication technologies. This is so because the report is of the view that the ICTs reduce transaction costs and speed up information and idea exchange, improving efficiency and sparking innovation. As ICTs are general purpose technologies increasingly embedded in the structure of the economy, the report says, they are becoming as necessary as power and transport infrastructure for all economies.


Botswana however scores big in the macroeconomic stability, scoring 100 percent, and ranking 1st together with other 30 economies. This pillar looks at the level of inflation and the sustainability of the country’s fiscal policy. “Moderate and predictable inflation and sustainable public budgets reduce uncertainties, set returns expectations for investments and increase business confidence—all of which boost productivity. Also, in an increasingly interconnected world where capital can move quickly, loss of confidence in macroeconomic stability can trigger capital flight, with destabilizing economic effects,” observes the report.


In the skills pillar, Botswana is ranked 92nd in the world. The pillar looks at the general level of skills of the workforce and the quantity and quality of education. The report contends that while the concept of educational quality is constantly evolving, important quality factors today include: developing digital literacy, interpersonal skills, and the ability to think critically and creatively.


“Education embeds skills and competencies in the labour force. Highly-educated populations are more productive because they possess greater collective ability to perform tasks and transfer knowledge quickly, and create new knowledge and applications,” said the report.
In the financial system pillar Botswana ranks 69 in the world. The pillar looks at the depth, namely the availability of credit, equity, debt, insurance and other financial products, and the stability, namely, the mitigation of excessive risk-taking and opportunistic behavior of the financial system.


“A developed financial sector fosters productivity in mainly three ways: pooling savings into productive investments; improving the allocation of capital to the most promising investments through monitoring borrowers, reducing information asymmetries; and providing an efficient payment system,” argues the report.  “At the same time, appropriate regulation of financial institutions is needed to avoid financial crises that may cause long-lasting negative effects on investments and productivity.”


In the pillar of market size, Botswana is ranked 111th in the world, while China is ranked first. The pillar looks at the size of the domestic and foreign markets to which a country’s firms have access. It is proxied by the sum of the value of consumption, investment and exports.
“Larger markets lift productivity through economies of scale: the unit cost of production tends to decrease with the amount of output produced. Large markets also incentivize innovation.


As ideas are non-rival, more potential users means greater potential returns on a new idea. Moreover, large markets create positive externalities as accumulation of human capital and transmission of knowledge increase the returns to scale embedded in the creation of technology or knowledge,” notes the report.


Other pillars which Botswana was ranked on include Product Market (95th), Labour Market (57th), Business Dynamism (103rd) and Innovation capability (101ST). In the Sub-Saharan Africa, ranked the lowest in competitiveness, there are three more countries ranked ahead of Botswana; Mauritius (49), South Africa (67), Seychelles (74).

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